2016 SOCIAL IMPACT REPORT We’re driven by the belief that strong financial returns and positive social change can be accomplished in tandem. HARBOURVEST SOCIAL IMPACT REPORT 2016 / page 1 CONTENTS Welcome ................................................................................3 HarbourVest Horizon Overview ...............................................5 Supporting Small and Emerging Managers .............................7 Seeding Underserved Managers .............................................9 Featured Portfolio Company .................................................11 Sourcing Diverse Managers ..................................................13 Supporting Diverse Managers ...............................................15 Tombstone Summary – Horizon Portfolio ..............................17 HarbourVest: Making an Impact Every Day ...........................19 Committed to ESG Issues ....................................................23 Outreach and Events ............................................................25 Partner Organizations ...........................................................29 HARBOURVEST SOCIAL IMPACT REPORT 2016 / page 2 DEAR READER, As those who are familiar with HarbourVest Partners are aware, our firm has spent over 30 years providing solutions across the private equity spectrum while also striving to be conscientious corporate citizens in the communities in which we work and invest. We are proud of this core value because it drives us to ensure that our investments and activities serve our clients, meet environmental, social, and governance (ESG) standards, and are consistent with the United Nations Principles for Responsible Investing. Our values also compel us to extend this impact by seeking leadership roles in organizations attempting to provide access to capital to all communities, organizing knowledge-sharing events, and demonstrating the meaningful outcomes our investments are having on underserved communities. ...understanding the To remain a best-in-class investment firm, we constantly look for ways to augment our analytical importance of investing and decision-making processes and product offerings. This drive to constantly evolve and improve in private equity also informs how we approach impact. For example, understanding the importance of investing in funds that are led by private equity funds that are led by women and ethnic minority investment professionals, and finding women and ethnic funds that invest in underserved geographies, led us to seek a partner with a long track record of minority investment making such investments. In early 2016, we acquired HarbourVest Horizon, a private equity fund professionals, and investor that has a decades-long history of providing access to capital to diverse-led private funds finding funds that invest in underserved and general partners focused on people and places that have historically lacked access to capital. geographies, led us The Horizon strategy enables us to generate additional material positive social effects. Its rigorous to seek a partner investment process and focus on the dynamic lower middle market in the US provides a compelling with a long track product extension for our investors. We believe our acquisition of the Horizon team is merely the record of making latest in a long history of looking for innovative ways to serve the community around us and our such investments. investors in myriad ways. HARBOURVEST SOCIAL IMPACT REPORT 2016 / page 3 We are pleased to present HarbourVest Partners’ 2016 Social Impact Report, which details the impact we strive to realize through our investment, educational, and leadership activities on behalf of our investor partners and employees. While only providing a sampling of these efforts, we believe this report encapsulates how we conduct ourselves, while also providing us with an opportunity to demonstrate the leadership our investor partners achieve through the manner in which they deploy capital. We hope you enjoy reading the report and are inspired by the meaningful positive outcomes investing can engender when it is deployed in an analytical, disciplined, and thoughtful manner. If you have any questions regarding our fund, co-investment, or secondary investment activities or the impact we generate on behalf of our investor partners through these activities, please reach out to us to learn more. Sincerely, Kathleen Bacon Managing Director, HarbourVest Horizon HarbourVest Partners Teammate since 1994. Founding Member of Level 20, a nonprofit dedicated to increasing opportunities for women in private equity. HARBOURVEST SOCIAL IMPACT REPORT 2016 / page 4 HARBOURVEST HORIZON OVERVIEW HARBOURVEST SOCIAL IMPACT REPORT 2016 / page 5 The Horizon team has worked together since 1997 and has As illustrated in this report, Horizon is making a significant impact been actively investing in lower middle market companies in these crucial areas and we are encouraged by the results. since 2002. During that time, Horizon has developed an We are particularly gratified to be able to achieve them in concert expertise in identifying and managing investments that can with our investment partners. drive meaningful, productive societal change. Horizon accomplishes this by investing in: SMALL MANAGERS UNDERSERVED MARKETS Funds that are smaller than core portfolio funds, typically Funds that invest in companies that have historically lacked below $750 million access to capital Returns driven by investing in a less efficient part of the market; Invest in historically overlooked segments; focus on where your focus on operational improvements and selling to larger capital is invested sponsors and strategics EMERGING MANAGERS DIVERSE MANAGERS New general partners, primarily first-, second-, or Women or minority general partners third-time funds Tap into growing segment and purchasing power of changing Build relationships with managers in early funds, seeding US demographics by investing in diverse general partners portfolio with future successful fund franchises HARBOURVEST SOCIAL IMPACT REPORT 2016 / page 6 SUPPORTING SMALL AND EMERGING MANAGERS Small Managers by Geography Small Managers by Investment SMALL MANAGERS 2% Distressed Mezzanine Analyzing small managers takes a special skill set, one developed over many years of working as a Other 8% cohesive team focused on ensuring that private equity capital is flowing to the next wave of promising 14% CA Current PA Income Venture fund managers. The drive to seed small managers takes an appreciation for the value this new talent 4% 28% 11% 32% provides to the private equity ecosystem. These budding firms bring an energy, philosophical diversity, CT 5% and skill depth that all successful ecosystems require to identify better methods of operation. Over the MA 5% last five years, Horizon has sourced and reviewed more than 975 funds with capitalizations of 19% $750 million or less. These funds have gone on to collectively raise more than $219 billion in assets 8% Growth TX 28% 28% under management (AUM). 8% > More than 85% of the small managers reviewed over the last three years raised a first-, second- IL NY Buyout or third-time fund at the time of review. > As of June 30, 2016, Horizon has closed and/or advised on commitments totaling approximately $977 million to 53 small managers. Together, these funds have raised more than $12 billion in AUM. > 95% of all Horizon portfolio funds are sized at $750 million or less. Small/Emerging Managers Emerging Managers by Geography by Investment Strategy > Small managers within Horizon’s investment pipeline deployed a wide range of CT 2% Distressed investment strategies, including all stages of venture, growth equity, buyout, Mezzanine MA distressed mezzanine, and current income. 6% 8% 6% CA Current > Geographically, small managers within Horizon’s pipeline were dispersed TX Income Venture 11% across more than 30 states, with the highest concentrations in 10% 34% 32% California, New York, Illinois, and Texas. 10% > Horizon holds an advisory board seat for more than 94% of the small IL 19% managers in which it has invested. Growth 34% 28% > 87% of the small managers in Horizon’s portfolio are a Fund I, II, or III. Buyout > 70% of the small managers in Horizon’s portfolio are a Fund I or II. NY > 70% of the small managers in Horizon’s portfolio targeted companies are based in low-to moderate-income communities as part of their investment strategy. HARBOURVEST SOCIAL IMPACT REPORT 2016 / page 7 EMERGING MANAGERS Horizon has long held a sustained interest in sourcing and investing in nascent private equity firms. 88% of Horizon’s portfolio funds are emerging managers that have raised a Fund I, II, or III vehicle, reflecting Horizon’s skill in successfully identifying promising emerging managers early in their development. > Over the last five years, Horizon has sourced and reviewed more than 1,200 funds raising a Fund I, II, or III. These funds have collectively raised more than $285 billion in AUM. > Emerging managers within Horizon’s investment pipeline deployed a wide range of investment strategies, including all stages of venture, growth equity, buyout, distressed mezzanine, and current income. > Geographically, emerging managers within Horizon’s investment pipeline were dispersed across more than 35 states, with the highest concentrations in California, New York, Illinois, and Texas. Small/Emerging Managers > As of June 30, 2016, Horizon has closed on approximately Emerging Managers by Geography by Investment Strategy